Watson’s Weekly 17-05-2020

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE DAY IN BRACKETS REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

• IN THE US AND CHINA – increased tensions between the two sides made markets wobble (Wednesday) as the January phase one agreement looks increasingly vulnerable and fears rise of a “second wave” of infections
• INDIA got a $266bn stimulus (Wednesday) to get the country through the coronavirus. This is equivalent to about 10% of India’s GDP and could be PM Modi’s chance to reform India’s land, labour and liquidity laws for the future
• RUSSIA’S got a bit of a leadership issue at the moment (Tuesday) because the guy that Putin picked to be his “new” PM at the beginning of this year, Mikhail Mishustin, is laid low with the coronavirus and has a stand-in who is now responsible not only for containing the spread of the virus, but also how to lift lockdown. What a job to come into! Andrei Belousov will clearly be Putin’s fall guy if anything goes wrong…
• EUROPE is having ongoing issues following the recent ruling of Germany’s constitutional court (Monday, Thursday) as some of the populist European countries are seeing it as an opportunity to put pressure on the EU. If this doesn’t get solved, there could be serious consequences – potentially even meaning the break-up of Europe. Surely it won’t be allowed to go that far, but I don’t think it’ll be a smooth ride to any kind of accord…
• There was confusion in the UK as some lockdown restrictions were lifted (Monday), but there was a lot of relief when chancellor Rishi Sunak extended furlough until October (Wednesday)
• IN OIL NEWS – the weak oil price continues to have repercussions. Saudi Aramco announced a 25% fall in profits due to the weak oil price (Wednesday) but both Brent and WTI have been rising as Saudi Arabia and other allies have committed to additional cuts from next month. If things are bad for Saudi Aramco, you know they are going to be bad for everyone else. According to Rystad Energy, 140 US oil and gas companies will file for bankruptcy protection this year and US shale producer Chesapeake Energy has hired in consultants to advise over its future (Tuesday) – with bankruptcy being a possibility
• IN ECONOMIC INDICATORS – there were some concerning bits of news regarding the US and UK consumer this week. In America, many people will lose their health insurance as almost 50% of Americans get it through their jobs (Tuesday) and although the government has said it will cover the costs for 28m uninsured, many are saying this won’t be enough. Presumably, the number of people losing their health insurance will increase over time as unemployment numbers rise. This is surely going to play on the minds of many a consumer and dampen any extraneous spending. In the UK, two separate surveys showed a fall in consumer spending. A survey conducted by the London Business School showed spending falling by 40% in April (Tuesday). This is shocking when you consider that the Bank of England’s recent forecasts of Britain’s worst recession for 300 years was based on consumer spending falling by “only” 30%! Another survey by the British Retail Consortium (BRC) said that sales were down by 20% in April versus the same quarter last year (Wednesday) – the biggest drop since records began in 1995. Whichever one you believe, the trend is the same! Also, the world’s biggest shipping container company, Maersk, painted a bleak picture of global trade (Thursday) and said that the coronavirus would lead to more protectionism and therefore less shipping around the world. Maersk is seen as a bellwether for global trade given its size, so this is not great news…

• Landsec cut the value of its retail property portfolio by almost 9% (Wednesday), reflecting ongoing losses in the retail sector and lower rent payments. The property landlord expects more business failures and higher vacancy rates and doesn’t expect activity to reach 2019 levels until 2022 at the earliest
• On the plus side, Superdry and Primark are benefiting from their European stores reopening (Monday) and some online retailers are doing a roaring trade. AO.com’s chief exec said that trading is like “Black Friday every day” (Wednesday) and Boohoo is actually building up money to make acquisitions (Friday)

• Richard Branson is trying to help Virgin Atlantic survive by selling off a stake in Virgin Galactic (Tuesday) and raising money from investors (Friday) amid carnage in the whole of the travel industry as Qatar Airlines and British Airways announce more job losses (Friday)
• Elsewhere, car rental companies continue to suffer (Monday) as they are highly exposed to the airline industry and because, over the years, they have been owning a higher proportion of their fleets. This will potentially leave them nursing more losses as falling secondhand car prices mean their resale value will be lower

• On the plus side, China car sales are going up (Monday), confirming what VW said last week BUT the company said that it would be stopping the manufacture of four models (Thursday) because of lack of demand in Europe. Pickup truck sales are doing well in America (Monday), but Toyota paints a downbeat picture (Wednesday) for its profits

• Watson’s Yearly updates: Not so many updates this week. Mexico cut its interest rate and there were a few other changes, but nothing too major.

My favourite “AND FINALLY” stories of this week were the hilarious Dog sees himself on the news and has priceless reaction to his TV appearance (The Mirror, Paige Holland https://tinyurl.com/yc7lqmy7) and the very touching Mum comes up with heartwarming idea so kids can hug grandparents in lockdown (The Mirror, Paige Holland https://tinyurl.com/y8n3xdpo). What a week!